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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






2. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






3. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






4. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






5. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






6. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






7. The output where ATC is minimized and economic profit is zero






8. The marginal utility from consumption of more and more of that item falls over time






9. Ed = 1






10. The lost net benefit to society caused by a movement away from the competitive market equilibrium






11. Demand for a resource like labor is derived from the demand for the goods produced by the resource






12. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






13. Ei > 1






14. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






15. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






16. Ed = 8 - infinite change in demand to price change






17. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






18. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






19. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






20. Models where firms agree to mutually improve their situation






21. A good for which higher income increases demand






22. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






23. 0 < Ei < 1






24. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






25. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






26. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






27. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






28. A good for which higher income decreases demand






29. The total quantity - or total output of a good produced at each quantity of labor employed






30. Exists if a producer can produce more of a good than all other producers






31. Es = (%dQs) / (%dPrice)






32. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






33. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






34. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






35. Product demand - productivity - prices of other resources - and complementary resources






36. The difference between total revenue and total explicit costs






37. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






38. AVC = TVC/Q






39. The price of a good measured in units of currency






40. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






41. Ed = (%dQd)/(%dP). Ignore negative sign






42. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






43. A firm that has market power in the factor market (a wage-setter)






44. Entry of new firms shifts the cost curves for all firms downward






45. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






46. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






47. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






48. Costs that change with the level of output. If output is zero - so are TVCs.






49. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






50. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage